by Ben Schreckinger
At the end of the week, in the predawn hours that most of us will spend sleeping off turkey and pumpkin pie, millions of Americans will gather in the dark to kick off Black Friday, the annual day-long frenzy of bargain-hunting that marks the beginning of the holiday season. Many economists wish they wouldn't.
Not because Black Friday, in which shoppers literally climb over each other to get at plastic toys and electronic gadgets, is an affront to human dignity. Not because it perpetuates crass materialism. But because, according to an influential strain of economic thinking, the act of gift-giving creates a dead-weight loss.
The seminal paper in this vein is Joel Waldfogel's “The Deadweight Loss of Christmas,” which goes so far as to estimate — based on interviews of Yale undergrads — that Christmas gifts represent a waste of many billions of dollars annually. Waldfogel's indictment of Christmas presents reads like a wonkier cousin of Jonathan Swift's modest proposal that the Irish eat their own babies — but it's totally sincere.
It was published just in time for Christmas in 1993. The Soviet Union had dissolved on Boxing Day only two years earlier. The market had kicked central planning's butt, which was great news for Americans, and especially great news for American economists. But it turned out to be bad news for Santa, because according to the logic of the market, Christmas is an obstacle to maximum efficiency.
That logic is straightforward: A person has a very good idea of her own needs, and given $100 to spend on herself, she'll spend that money on the things she wants most. But someone else spending $100 on a gift for that person probably has inferior knowledge of that person's preferences, and will buy them something they value less. The better option, then, is to give the recipient $100 and let her spend it for herself.
In 2001, The Economist reexamined the case against gifts and came up with a somewhat more nuanced conclusion. Their analysis elaborates on special cases where a giver might be able to make more efficient use of the money — by giving the recipient what he really wants but won't buy for himself, for example — a possibility that Waldfogel acknowledges. It also stumbles upon the insight that gift-giving itself can give an item sentimental value. In the way that it can sometimes read like The Alien's Guide to Being Human, the magazine advises readers to “Try hard to guess the preferences of each person on your list and then choose a gift that will have a high sentimental value.”
On this line of thinking, indifference curves still offer a useful tool for understanding gift-giving: If we add sentimental value to our model and run the figures again, we might be able to save Christmas after all. But in reality, dead-weight loss and Christmas just don't belong in the same sentence. To understand why, it's helpful to look to the work of UCLA anthropologist Alan Fiske, who's observed that human relationships follow four basic models that correspond to four sets of values: communal sharing, authority ranking, equality matching, and market pricing.
